Sir Mervyn King warned last night that the global financial crisis is "far from over" and that fundamental changes are needed to the international system before confidence can be regained.

King, the governor of the Bank of England, said there would be many twists and turns before the worldwide economy stabilises. Speaking at an event at the London School of Economics, he said: "Whichever crisis we are talking about, it is far from over … there will surely be many unexpected twists and turns before we can truly say that the crisis is indeed over."

On the day after the Cypriot government put forward a rescue package to stabilise its economy, King's comments will reinforce concerns that the eurozone has failed to put its house in order. The event was also attended by Ben Bernanke, chair of the US Federal Reserve, who voiced concerns about fundamental imbalances exposed by the financial crisis. He said that while the eurozone works for some countries, it was obvious that others were unable to keep up. "There is a basic question: what is the right size for a single monetary policy?" In a clear reference to Greece, Portugal and Cyprus, he said the crisis had exposed countries with weaker productivity and higher labour costs.

The former head of the German central bank, Axel Weber, also speaking at the event, added to the warnings that the crisis had yet to play out in full. "We are not out of the woods yet," said Weber, now chairman of investment bank UBS. Weber emphasised that the colossal debts run up by western countries in the aftermath of the banking crisis remained a huge drag on economy growth and stability. "While there be more signs of stability, this may in fact be a period when problems that are still with us resurface. The underlying situation remains difficult and is not improving," he said.

He said the soaring stock market had provided a false hope that the eurozone crisis has eased. Weber joined former US treasury secretary Larry Summers and IMF chief economist Olivier Blanchard on stage at the London School of Economics to mark the end of King's 10-year term as Bank of England governor.

King will retire in the summer and will be succeeded by the head of Canada's central bank, Mark Carney, who was in the audience along with many of the world's top economists and central bank staff.

Weber said he was also concerned that governments had responded to the crisis by giving more powers to central banks. He recalled how he refused an offer from the German finance ministry to take on regulatory powers, fearing it would undermine the bank's monetary policy role. "As central banks play a larger role, we need to see the potential downsides," he said. "I'm concerned they are taking roles that distract them from their main task."

Blanchard said the powers acquired by central banks created a "democratic deficit" that could eventually lead to social unrest. The situation in Europe was a cause for concern, especially when central banks were put in a position of making crucial decisions that affected millions of people's lives, he said.

His comments echoed those of many politicians across Europe after the crisis in Cyprus was exacerbated by demands from the European Central Bank for a resolution. The ECB warned last week that it would refuse to lend to banks in Cyprus unless a deal was struck, pushing the government on the island, which is only four weeks old, to accept demands from Brussels for an initial €5.8bn (£5bn) cash payment to secure loans worth €10bn. Bernanke defended the policy shift that has seen central banks assume regulatory powers, arguing that it provided a unique view of the way that international money markets operated. "It is important for central banks to be regulators to understand the financial system and how it is developing," he said.